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. Last Updated: 07/27/2016

China Bans Foreign Cash in Telecoms

BEIJING -- In a step with implications for one of China's fastest-growing industries, a senior official has said the government will enforce its ban on foreign investment in operating Internet and other telecoms services.

Several major Chinese Internet companies already are part-owned by foreign Internet or media firms. Foreigners also are involved in operating web sites and other Internet-related companies based in China.

Information Industry Minister Wu Jichuan said Tuesday that since 1993, Chinese regulations have "clearly stipulated that no foreign investment is allowed in the operation of telecoms networks and services.''

Speaking at a news conference, Wu said that China does allow foreign investment in manufacturing and development of telecoms equipment. He did not respond to questions about how the government would enforce its ban on foreign investment in telecoms or specify how it applied to Internet-related businesses.

The Financial Times newspaper reported Tuesday that Minister Wu had said foreign investment in Internet-related services was banned.

Wu said his comments had been misinterpreted but did not explain how. "China's government still needs to strengthen its management over the information content business,'' the Financial Times quoted Wu as saying.

"So, whether or not it is an ICP [Internet content provider] or an ISP [Internet service provider], it is about value-added services. In China, the service area is not open,'' Wu said.

The Information Industry Ministry, which runs China's telecommunications and postal networks, has sought to shut out foreign competitors from a market it views as strategically important.

China's long-sought entry into the World Trade Organization could force that market open, obliging the ministry to loosen those restrictions.

Pressed to discuss how the ministry and China Telecoms, its monopoly phone company, would cope with foreign competition, Wu acknowledged that membership in world trade's rule-making body would present "both opportunities and challenges.''

"If China enters the WTO the ministry must implement any commitments made by the Chinese government,'' he said. "We will do a good job of strengthening the telecoms sector whether we enter WTO or not.''

The government last year ruled out the use of an investment mechanism that had let foreign telephone companies become minority partners in Chinese phone services, evading the ban on foreign ownership.

The number of Internet users in China surged past 4 million in June, up from 2.1 million at the end of last year, according to the China Internet Network Information Center.

That explosive growth made the first overseas listing by a Chinese Internet company in July a huge success.